KINGSPORT — Hospital systems in the region appear to be coming to a financial crossroads, and Tennessee Gov. Bill Haslam says he understands what’s at stake.

Top executives of Wellmont Health System, Mountain States Health Alliance and their respective hospital associations in Tennessee and Virginia have been saying this: We agreed to accept cuts under the federal Affordable Care Act (ACA) in exchange for expanded health insurance coverage that would reduce our bad debt and charity care.

Those cuts, hospital officials note, are the reduced amount the federal government reimburses hospitals to take care of Medicare patients.

In return, they are pushing hard for expanded Medicaid coverage and huge amounts of federal dollars coming with it.

“Without balancing these cuts in some way, many hospitals will not be able to function as a full-service acute care hospital and some may be forced to close altogether, which would make it very difficult for their communities to attract new jobs,” said a Tennessee Hospital Association (THA) position paper issued last February. “With the cuts already in law and those currently pending, Tennessee hospitals stand to lose 90,000 jobs in a 10-year period. This is equal to the number of jobs lost in Tennessee during the height of the recession in the summer of 2009.”

While federal and state dollars fund Medicaid, it is managed by states and neither Tennessee nor Virginia is anywhere close to expanding its programs.

When asked about the warnings coming from Tennessee hospital officials, Haslam said: “We’ve had those conversations with hospitals across the state, and it’s obviously something we take very seriously. It’s not just the jobs but the availability of health care. We understand how important that is. I would say there’s a whole lot more important things going into whether we decide to expand Medicaid or not.”

Back in March, Haslam announced he would not expand the state’s Medicaid program, called TennCare, under the ACA model but would instead work to leverage those federal dollars to purchase private health insurance to help an estimated 175,000 uninsured Tennesseans.

Haslam’s “Tennessee Plan” called for co-pays and compensating health care providers for healthy outcomes, not just services performed.

But the federal government, namely the Department of Health and Human Services (HHS), has to approve Haslam’s plan, and the two sides are still negotiating.

“We’ve been going back and forth with them,” Haslam, a Republican, said of the talks with HHS at the Thursday launch of his “Healthier Tennessee” initiative at the Eastman Employee Center. “I anticipate having a conversation with them sometime in August, probably in Washington, to finally say ‘Here’s where you are, here’s where we are, let’s see if we will have something to work together.’”

The idea, Haslam pointed out, is to put preventative care in TennCare, which serves more than 1 million Tennesseans.

“I wanted to say to Washington: Can we have Medicaid that does encourage healthier choices? It’s one of the discussions — can we give incentives to not use tobacco and make all those (healthy choices)?” Haslam asked. “(HHS) would say ‘We’re OK with you considering incentives, but we don’t want there to be penalties.’ ... That’s a little of what their view is.”

In Virginia, a 10-member commission made up of state lawmakers was appointed to consider both health reform and possible Medicaid expansion.

During a forum held last Wednesday in Abingdon, the Virginia Hospital and Health Care Association (VHHA) presented Medicaid expansion as an economic development opportunity.

VHHA said expansion could create an estimated 30,000 jobs and bring in an extra $2 billion through 2018.

But VHHA also used warning language in a document issued at the forum.

“For health care systems, the bottom line remains the same — serious financial risk and likely job reductions if significant and certain Medicare cuts are not balanced by optional coverage expansion,” the VHAA document said.

“Out of the five House members and five Senate members (on the commission), a majority of both houses has to agree, so you have to get three House votes and three Senate votes,” O’Quinn explained. “I don’t see where you get three votes out of those five people from the House right now.”